How to avoid late payments and late fees

How to avoid late payments and late fees

Save money—and your credit score. Just one late mortgage payment can cost you money—and hurt your credit score. Here are some tips that can help you avoid the consequences of paying late.

Sometimes life throws you a financial curveball, and suddenly it looks like your mortgage payment might be late. A common myth says that “one late payment won’t hurt your credit score.” But the truth is that just one late payment can do significant damage to your credit score and cost you lots of money. 

For example, did you know that your payment history is the number-one factor that credit bureaus use to calculate your credit score? Did you know that late payments can stay in your credit file for up to seven years? And are you aware that mortgage late fees are typically higher than credit-card late fees? 

How to avoid paying late 

The good news is that late payments are usually avoidable. Here are nine tips you can use to dodge the negative results of paying late: 

1. Call us. 

First and foremost: If you miss your due date, or even if you think you might miss your due date, please call us at 800-365-7107. Financial problems can be difficult to talk about, but don’t let that stop you. We’re committed to working with you to help resolve whatever situation you may be facing, and we really do want to help. For example, If you’ve paid on time for many years and it’s your first time ever paying late, it may be possible for us to waive your late fee. We can also refer you to no-cost financial counseling services in your local area. 

2. Understand the difference between due date and grace period. 

For most traditional mortgage loans, your payment is due (that is, we need to receive it) no later than the first day of each month. For example, we should receive your April payment in late March—but no later than close of business on April 1. As described in your mortgage agreement, you need to do everything you can to make sure we receive your payment no later than the due date. 

But just in case something unusual prevents that, we offer you a 15-calendar-day “grace” period. The grace period is a window of time during which you can make a late payment—but without us charging you a late fee. So even though your mortgage payment is actually due on the first, you can avoid a late fee as long as we receive your payment before close of business on the 16th of the month (or the first business day after that if the 16th falls on a weekend or holiday). 

An important note about the grace period: It’s not a free pass to regularly delay your payment until the middle of the month. Its purpose is to allow you to make an occasional past-due payment without negative consequences. Some states require a grace period by law, and some don’t. But when it’s available, a grace period can be a real benefit if you ever need it. Just remember that paying during the grace period needs to be the exception, not a regular habit. We strongly advise you to do everything you can to make sure we receive your payment no later than your due date. Pay during the grace period only when you have no other choice. 

3. Understand late fees. 

When business closes on the 16th of the month (or the next business day afterward), we’ll charge you a late fee if we haven’t received your payment. But a mortgage late fee isn’t like a credit-card late fee—which ranges from about $30 to $40. A mortgage late fee can be up to five percent of your total past-due balance. So if your past-due mortgage payment is $1,400, your late fee could be as much as $70. Read more about the list of all of our fees.

4. Pay by auto-draft. 

One of the best ways to avoid late payments is to pay by auto-draft—that is, by an automatic, prescheduled withdrawal of funds from your banking account (sometimes called “autopay” or “ACH withdrawal”). With auto-draft, you’ll never have to worry about forgetting or being too busy to make your payment. We deduct it, automatically and securely, from your banking account on the date that you decide. To set up monthly auto-draft payments, download our Automatic Payment Enrollment Form and follow the instructions. (To set up bi-weekly auto-draft payments, download our Biweekly Automatic Payment Enrollment Form.)

The biggest potential problem with auto-draft payments is ensuring that your banking account has a large enough balance to cover the withdrawal. Otherwise, you could be facing overdraft fees from your bank, as well as NSF (non-sufficient funds) fees and late fees from us. Practical tip: To help ensure there’s enough money in your banking account to make your mortgage payment, set your auto-draft date for a day or two after one of your regular paydays. 

5. Make sure your bank-account info is correct. 

Whenever you set up auto-draft payments or make a payment through our website, we need accurate banking account information. Out of all possible reasons for a late payment, the number-one reason we see is homeowners providing us with invalid account information (such as your bank routing number or your bank account number). Always double-check your information to ensure it’s accurate. 

6. Set up reminders. 

While auto-draft payments are your safest bet to avoid paying late, some people still prefer doing things manually—which is fine. But to ensure your payment is always on time, you may not want to rely only on your memory. Instead, consider setting up calendar reminders on your phone, tablet, or computer. If you want to go really old-school, write payment reminders on whatever paper calendar you normally refer to. Practical tip: On whatever day you’ve set aside to make your payment, don’t wait until the end of the day; complete your payment at your earliest possible opportunity. 

7. Don't wait until the last minute. 

If you do pay manually, try to pay sooner rather than later. Especially do everything you can to avoid waiting until the last minute. That’s because our payment systems have daily cut-off times, after which we can’t credit (or “post”) your payment to our account until the next business day. Also, we don’t post any payments on holidays or weekends. Our cut-off times are as follows: 

  • We must receive payments by mail (such as checks or money orders) no later than 3 p.m. Eastern time. 
  • We need to receive website or phone-in payments no later than 11:45 p.m. Eastern time. 
  • Any payments we receive on weekends or holidays will not post to our payment systems until the next business day.

8. Let the most capable person pay the bills.  

Do you live with a spouse or a partner? The person who pays the bills needs good organizational and accounting skills—and the ability to plan ahead so everything gets paid on time. So if that doesn’t describe you, let someone else do it. It’s very likely that one of you hates paying bills and the other loves it; so give that task to the one who is most interested and capable. 

9. Raise more money. 

Sometimes finances can be especially tight, and making your payment on time may seem impossible. If that happens, first review your spending to identify any non-essential expenses that you can cut back on or eliminate. Also, consider how you might be able to generate some cash quickly to help make your payment. For example, you may be able to pick up a quick side job or sell something of value.

What to do if you're already past the due date 

Have you already missed your due date? Don’t panic! There are still things you can do to minimize negative consequences: 

  • Reach out. As previously noted: Call us immediately (800-365-7107and tell us what’s going on. We’re committed to working with you, and we’ll do everything we can to help you find a payment solution that meets your needs. 
  • Try to pay before month-end. We’ll probably charge you a late fee if you don’t pay by the end of the grace period, but we won’t report your late payment to the credit bureaus until it’s 30 days past due—so you may have some time to come up with the money you need before your credit score is affected. Refer back to tip #7 (above) for ideas about how to generate some extra cash. 

The bottom line 

Even one late mortgage payment can cost you more than just money—it can also have a negative impact on your credit score for years to come. And if your late payments continue, your late fees will multiply and the hits to your credit will only get worse. So remember these helpful tips, and do everything you can to pay by the due date.